The are many theories of how to play the stock market, some will make you money, some will not, but generally the consistency of making money on the markets without being an insider has been and is very hard. Some theories work better than others for a few years, but then they lose money or give back most of the money in a very short time. Still new theories and strategies will come forth.

In an book called The Man who Solve the Market – How Jim Simons launched the Quant Revolution, by Gregory Zuckerman, published by Portfolio Books by Penguin Random House, NY, 2019, the author gives a history of Renaissance Technologies. Their track record between 1988 to 2018 an average of 39.1% annual returns.

The head of Renaissance Technologies is Jim Simons and he started off as a math wizard working for universities and the government. During WW II, Mr. Simons was part of the group trying to decode the German communication and make life easier for the allies. Part of the solution was to look for patterns.

Eventually, Mr. Simons helped an University build up a strong Math department and this was good to learn management skills including recruiting.

In the world of math departments, they are dependent on university budgets, but some want to make more money and use their math skills in other areas of the economy. Mr. Simons wanted more money and he started in the commodities field because it was easier to gather data and understand what goes into commodity trading.

Eventually, he examined stocks, lost money and started gathering streams of information to find a small pattern that tended to repeat itself. Understanding the patterns and stock trading repeating itself eventually means making small amounts of money on thousands of trades.

In the book, the algorithms were not perfect and lead to losses and understanding the bottlenecks of the programs. Once it was sorted out, the profits came again.

The reality is it still possible to make small amounts of money on many trades but it took the continual declining of buying and selling commissions; it took programming great amounts of information for the machines to learn; and patterns tend to change as everyone sees the same patterns. It is a credit to Renaissance for leading the quant revolution, and with AI in the future for more people, perhaps we will see how Renaissance reacts to higher levels of computing.

Linking to dividend paying stocks, Mr. Simons did not really care what he owned, as long as the patterns make money. If you want a 39% consistent return, you have to take considerable risk and be fortunate more than you are not. If you want a consistent return by not losing money and getting paid along the way, dividend investing is a great method to do. In the book, when Renaissance was making billions, everyone in the firm was wealthy, do they still work hard or do they want different things in life when the money flowed into their bank accounts? With dividends investing the balance tends to be better.

There are more questions than answers, till the next time – to raising questions.

If you are an investor you will pay more than a curious passing to the politics of the day. As an investor, it is possible you will learn about the process of government and government contracts which could influence the way you invest. If you are aware of how the process is supposed to work and somehow it does not work that way, your radar or smell test will go up. It may take a little why to understand what is going on, but your radar will go up. Sometimes you will invest, sometimes you will leave it alone. Often times it will depend on a word or two and the intentions.

Recently read a book called Civil War – A History of Ideas by David Armitage published by Allen Lane or Penguin Random House LLC, New York, 2017. In the book, Professor of History at Harvard University David Armitage wrote about civil wars since the Roman times. What is a civil war, what has to happen and who classifies war as civil or not. What should people do?

A parallel to what is happening in the US are lawsuits regarding should Donald Trump be on the ballot in various states because of the word insurrection. In various states, the one in Colorado has both side in court debating whether the January 6 was or was not an insurrection. The debate centers about the 14th Amendment to the Constitution and what did it mean when it was passed after the Civil War. The clause was deemed necessary to exclude people from being involved in government processes if they tried to change the administration with violence.

Linking to dividend paying stocks, fortunately with stocks, we rely on the numbers and the numbers should not lie. They maybe fudged, but if enough people see the statements and do analysis, the flaws come forth. Traders who specialize in short selling, often are the best folks at finding something wrong or not quite right. As an investor, you expect the company you are investing in to be above the law, one of the methods to ensure this is asking does the company make a profit for a number of years, can it easily pay its dividends and expect to do so for a number of years, and does the company tend to stay out of the courts. The courts have a great function in many aspects of people lives, ideally as a dividend investor you want to see less of them.

There are more questions than answers, till the next time – to raising questions.

Mergers and acquisitions happen in all sectors and the process is the same for every merger. A company continually looks at strategy and sometimes it is determined a company would add to the existing company. The company has assets, delivery services that would make a great fit for the existing one. Then the hard begins of determining the best price which the other company will agree on and the merger can go forward. If the price is too low, the answer is no, and every company believes it is worth more, or the price is both an art and science. Sometimes it does not work.

In an article by Anirban Sen of Reuters, US health insurer Cigna Group called off its attempt to buy a rival company Humana after the pair agreed to the correct price.

If Cigna-Humana combination had gone through the 2 companies would have a value of $140 billion. It was expected the antitrust scrutiny would have been an obstacle to come. Cigna and Humana have business overlap concentrated in Medicare plans for older Americans.

Cigna Group announced plans to buy back $10 billion worth of shares for President and CEO David Cordani believes the shares are undervalued. This year the company has bought back $1.3 billion in shares.

Linking to dividend paying stocks, companies that are profitable have an active strategy group because they have the abilities to pay the bills – there is movie line in crime drama which says follow the money. The mergers go through a process and when the process reaches the press release stage, there is no plan B. The game plan is plan A. When things do not work out, as an investor you need to ask how does the company react? The merger process takes many hours of work and executive time, how does the company go forward?

There are more questions than answers, till the next time – to raising questions.

In most industries particularly in commodities, bigger is better for efficiencies and profitability. In the domestic oil industry, Exxon bought Pioneer Natural, Chevron bought Hess Oil, Occidental Petroleum is buying CrownRock and the list goes on. While investors typically focus on the Europe and US, there are other countries with significant oil and gas companies, including Australia.

In an article by Scott Murdoch, Emily Chow and Lewis Jackson of Reuters, two of the largest oil and gas companies wish to combine to be larger. If the deal is completed, the biggest liquefied natural gas(LNG) producer in Australia, the world’s no. 2 exporter of the super chilled fuel that is expected to see decades of growth to meet Asia’s energy transition needs.

Woodside is headquartered in Perth, Australia and has a market capitalization of 56.91 Australian dollars, while Santos is headquartered in Adelaide is valued at 22.1 Australian dollars.

The two companies would have 260 million barrels of oil production, while the total production plus probable reserves at 5.39 million BOE. In turns of LNG sales would be expected to be 60 million tonnes.

Jun Bei Liu, a Tribeca Alpha Fund portfolio manager who owns shares in both companies said in today’s world oil is almost done so you need to get scale and generate as much profit as possible to invest for the energy transition.

Linking to dividend paying stocks, the world economy changes over time and to meet the classic supply and demand companies have to change. What has profitable at scale changes and sometimes to maintain margins, the companies need to consider and do mergers. The industry can still be and is profitable but the number of players changes, it is neither good nor bad, it just is.

There are more questions than answers, till the next time – to raising questions.

Most of us like the positive, when things and events seem to going forward. There are a great many expressions about the possible good future and some you will like and others not so much. When an economy goes south, hopefully if you are in one it does not affect you, but if the economy slowdown too much invariably it will affect either yourself or someone you know. When the economy turns, the whole country feels like it can be the king of the castle and many good things happen.

In an article by Joe Cash of Reuters, for the first time in 6 months, China’s exports grew. China is the world’s 2nd largest economy and it is thought buyers are attracted to the discount prices to get over a prolong slump in demand.

Exports grew 0.5% from a year earlier in November.

The Baltic Dry Index, a bellwether gauge of global trade climbed to a 3 year high in November, supported by improved demand for industrial commodities, particularly from China.

China is not out of the woods yet, the country’s official purchasing managers’ index (PMI) showed new export orders shrank for the 9th consecutive month, while a private sector survey highlighted the struggles of factory owners to attract overseas buyers for a 5th round.

Factory gate prices in the official PMI contracted for a 2nd month in November, while input costs expanded for a 5th straight month.

Dan Wang, chief economist at Hang Seng Bank China noted the data shows overseas demand is stronger than we thought and domestic demand is weaker than we thought. The biggest export items are still electrical machinery and cars.

The International Monetary Fund (IMF) in November upgraded its China growth forecasts for 2023 and 2024 by 0.4% but that came from a lower base. Moody’s slapped a downgrade warning on China’s A1 credit rating.

China’s crude oil imports in November fell 9.2% year over year, the 1st annual decline since April as high inventory levels and poor manufacturing activity took their toll on demand for products such as diesel. Iron ore imports climbed slightly in November.

Pinpoint Asset Management’s Mr. Zhang says, China’s needs to depend on domestic demand as the main driver for growth in 2024.

As a long-term investor, one of the phrases that is music to your ears is the focus is for stability in the next year. If there is stability, that means as an investor you have to do less or monitor your investments as you go about your normal life. In all industries there are non-stable events and they affect companies in different ways. Sometimes the non-stable events allows the company to rally its employees and suppliers to make the non-stable event back to normal. These events take extra logistics but sometimes moral is higher because of the accomplishments that were achieved.

In an article by Joanna Plucinska of Reuters, the airline industry profits are forecasted to be stable in 2024 according to the industry group IATA.

The global airline sector has largely recovered from the COVID pandemic and airlines became profitable in 2023 with net profit of $23.3 billion on a 2.6% margin. The IATA or International Air Transport Association believes profits will increase to $25.7 billion on a 2.7% margin.

The global airline industry is set to have $964 billion in revenues. The money will come from the 4.7 billion people flying as compared to the 4.5 billion in 2019.

In China, international traffic is down 40% from COVID levels.

Jet fuel prices are expected to account for 31% of airline operating costs.

Linking to dividend paying stocks, hopefully your dividends allow you to fly and be one of the 4.7 fellow flyers. If yes, the airports are crowded but the time saved by flying is significant particularly in you fly from coast to coast. As a long-term investor, you want the opportunity to buy stocks when they are out of favor or low in price and move higher as the economy improves but you are always looking for stable markets which allow for good margins and continuing profitability for your investments.

There are more questions than answers, till the next time – to raising questions.

In grade school most young people learn about how a bill from either the State House or Congress is made. The bill addresses a problem with a solution that people debate over and some will like it and some will not. The debate is rarely over the solution for we all want things to work well, but the details or the regulations. There will be some who want fewer regulations and be allowed to do what they want to and there will be some that want more regulations because they do not trust the benefit of the doubt, usually the result is something in between or the middle.

In an article by Pete Schroeder, Michelle Price, and Lananh Nguyen of Reuters, the CEO of the biggest banks in the US testified before a committee in Washington about regulations that could affect their industry.

Unlike most industries, the banking industry has many of the same large players over the years which allows their lobbying groups to be consistent with their messages. The banking lobby associations spent time lobbying the members of the committee well before the annual Washington hearing. Similar to all organizations on every committee there are a few people who likely open to changing their votes, while some are camped in on side or the other.

The CEOs warn the regulations will impact the way they do business and some of the loans the anti bank people on the committee want the banks to lend will not go forth. The pro bank people believe the banks will tend to the right thing for them and their customers. In the world of big banking there is much truth on both sides of the coin.

The reporting states the hearing quickly became a battle of narratives with many Deomcrats casting skepticisms on the industry’s complaints and accusing them of overemphasizing the risks, while the Republicans and the CEOs stressed the potential adverse impact on a range of products and services. The issue of unintended consequences was raised – an effect the regulations will have which was not the desire outcome but ends up the logical thing to do.

Linking to dividend paying stocks, many CEOs of profitable companies end up before Washington committee hearings because they are the larger players in their fields and they continue to be profitable. The lawmakers often wish to tinker and need the public advice of the profitable players for them to stay profitable but make something better for the consumers. In the process, the CEOs are briefed by their public relations people, their lobbyists in order to offer the empathy and come out of the hearings with the solutions that help the company. Sometimes the solution is you will work with us to help draft the legislation? Yes, we will work with you. If the CEO is not briefed before a committee, then it is time to find alternatives.

There are more questions than answers, till the next time – to raising questions.

A number of years ago, there was a movie made about Roy Kroc the former CEO of McDonald’s. He was a salesman for milkshake company and went to California where a restaurant run by the McDonald brothers ordered more milkshake machines than any other customer. Mr. Kroc loved the business and eventually brought the franchise system to the US with its headquarters in Chicago. The franchise system revolutionized the restaurant industry and most people have eaten at a franchised restaurant for some of their meals. The concept is going strong and will continue.

In an article by Dee-Ann Durbin of the Associated Press, McDonald’s expects to open nearly 10,000 restaurants over the next 4 years to have over 50,000 restaurants in operations. In the US, the number will be 900, in the other G7 countries about 1,900 and 7,000 in international markets with over half in China.

The company took 33 years to open its first 10,000 restaurants and 18 years to grow from 30,000 to 40,000 and expects 4 years to go to 50,000. The company has the formula down pact.

In comparison to Starbucks, it has expects to grow from 38,000 to 55,000 stores by 2030.

McDonald’s announced a multiyear partnership with Google Cloud to speed things up in the restaurant. Chief Executive Officer Chris Kempczinski said the cloud will speed things up such as menu recommendations on ordering kiosks or drive thru lane. The new system will allow managers to optimize staffing.

Chief Financial Officer Ian Borden said the company has the confidence to invest in new stores and new technology because of the strong performance of its stores. Worldwide sales are up 9%.

The company is focused on its core menu items which make up 65% of its sales. It is selling about $34 billion in beef and $25 billion in chicken annually with the chicken sales are rising faster than beef. In turns of coffee, sales are 8 million cups a day and the company is moving towards one brand the McCafe and ensure consistency across the globe.

Linking to dividend paying stocks, McDonald’s is a company that continues to grow and people enjoy the food. Their revenues allows the company to reinvest into the company and there are many robotic options for the future for example one chain of restaurants using robotic frying. If a company can continue to reinvest in operations and grow, as long as you like the food it is worth investing in.

There are more questions than answers, till the next time – to raising questions.

If you have ever seen a WW II movie about American GIs you will notice many of them had cigarettes. It turns out, an American General wanted to ensure the GIs had something to remind them of home in their rations. The thinking was if the soldiers were reminded on a regular basis of why they were fighting, the war would end sooner. The rations included a Coke, this helped Coca Cola establish bottling facilities around the world on the government funding. In addition, all the GIs received cigarettes.

One of the consequences of the actions of the General was after the war was over and the GIs came home, they drake Coke and smoked cigarettes more than a previous generation. It was not long ago, a standard piece of office equipment was an astray for people smoked in the office. Smoking has been legal since the British came to America and the native people introduced them to tobacco. Much of the country was founded on growing tobacco for one of the negative aspects of tobacco is the plant uses the nutrients in the soil and if there is no method to add fertilizer, farmers had to move westward to find new farmlands to grow tobacco.

From an investor’s point of view, Warren Buffett said to the effect it is an industry that produces cigarettes at pennies and sells them for dollars and that is an industry I want to be an investor in. It took to close to year 2000 when it was disclosed cigarettes were designed to deliver nicotine to smokers which ensured the smokers would continue to buy as they were addicted to the nicotine. Lawsuits followed and cigarette companies paid fines, could not advertise directly and fewer people smoked, however the companies paid a healthy dividend, and the product is legal. It was not till this year that Phillip Morris company said the effect of raising prices has meant fewer sales as consumers are switching to lower priced cigarettes. (After the announcement, my shares were sold).

All companies do 5 year and more plans, because the number one job of executives is capital allocation to the divisions which will make money to shareholders.

In an article by Emma Rumney of Reuters, the largest cigarette company for global cigarette sales is a company called British American Tobacco (BAT) of London, England. The company is taking a $31.5 billion write down of its US tobacco brands. The executives determined in decades to come the US brands will still be legal and will be selling, but due to a wide range of factors, the brand value will be low. BAT has 5 global brands of Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. In the US brands include Newport and Camel.

The cigarette companies are some of the leading marketing companies in the world building brands and encouraging consumers to be loyal to them. (if you want to study marketing study the tobacco companies) and the companies have stakes in smoke free solutions including vaping.

It is noted by analysts if you own cigarette company shares directly, they are a very profitable business paying high dividends and the company regularly buying back shares to enhance shareholder value.

Linking to dividend paying stocks, for decades owning shares in cigarette companies came with a very healthy dividend and guaranteed profits even as the companies were paying large fines to the government. Society changes and while smoking is legal, there are fewer people smoking which means the pie is getting smaller. For a number of years, companies could see increase sales in foreign markets but competition is getting harder. There are many good reasons to own shares in cigarette companies but as you plan for 5 years and 20 years down the line at some point you might want to find alternatives for US marketed companies.

There are more questions than answers, till the next time – to raising questions.